The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, along with newly updated and revised forms that conform to the requirements of the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding to small businesses that needed loans. The money was intended to mitigate the economic effects of the coronavirus pandemic. The law requires that the SBA release simplified forms within the first 24 hours of the legislation’s signing into law. This was done to facilitate the application for forgiveness. Additionally, it included conditions to encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirements to release the one page form for loan forgiveness under the PPP within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released new forms that were updated.”
Forgiveness terms for the initial draw of PPP loans
Calculate Ppp Loan Forgiveness – For eligible borrowers First Draw PPP loans are eligible to forgive loans. This is when the loan is disbursed within an 8 to 24-week timeframe.
- It’s the same for employee compensation and the.
- The loan proceeds can be used to pay the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of profits go towards payroll costs
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24-week covered period following loan payment:
- The First Draw PPP loan requires that the compensation and employee levels are maintained in the identical manner.
- The proceeds of the loan could be used to pay for payroll costs or other expenses that are eligible.
- At least 60% of funds go to payroll costs
- How do I request loan forgiveness and when to apply
After all loan’s proceeds have been used, a borrower can apply for forgiveness. The borrower can apply for forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 months of the end of the time period that was covered, then PPP loans are not deferred any longer, and the borrower will be required to make payment to their PPP lender.
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